SBS Philippines Corp., a chemical trading firm that now seeks to diversify into property-related businesses, has ditched a plan to raise fresh capital from a follow-on public offering in favor of selling new shares to existing investors.
In a disclosure to the Philippine Stock Exchange on Monday, SBS said its board had agreed to revoke its earlier approval for a follow-on offering and instead recommend a stock rights offer consisting of up to 350 million of unissued shares within 12 months from approval of shareholders.
Based on its current stock price of over P6 per share, the proposed sale of new stocks to existing shareholders can raise over P2.1 billion.
“Anesy Holdings Corp., the company’s major shareholder, has indicated its support for the rights Issue and will subscribe to any remaining stock rights shares that will be unsubscribed after the mandatory second round of the stock rights offer,” the disclosure said.
SBS has rescheduled its annual stockholders meeting for June 9, during which the stock rights offering will be proposed alongside an amendment of its bylaws to boost authorized capital stock to P5.55 billion from the current P1.55 billion.
After obtaining approval from stockholders, the proposed offering will still need imprimatur from the Securities and Exchange Commission and Philippine Stock Exchange.
“The rights issue is intended to provide additional core capital to support the growth and strategic initiatives of the company which will include, among others, its business diversification plans to engage in property related investments and businesses,” the disclosure said.
“Management is currently evaluating the allocation and specific uses of the proceeds of rights issue which will be determined and finalized by the board of directors after the approval of the shareholders,” it added.
SBS, which is currently valued by the stock market at around P7.2 billion, earlier said that its chemical trading business had been highly successful that, over time, the company was able to invest its surplus funds to take advantage of opportunities in the real estate market and experience a significant improvement in values of its real estate investments.
In 2016, SBS unlocked the value of certain long term investments in property related holdings which were held for capital growth and completed with a significant one-off gain from the disposal of such investments assets in the amount of P858.8 million.
The board of directors now believes that the business prospects of property investments have much potential given the robust growth of the property market and sees such investment strategy to contribute materially to SBS’ earnings on a sustainable and long-term basis.
Funded initially from its earnings from the sale of its investment properties, SBS now intends to further take advantage of the opportunities in the real estate market and continue with such investment strategy as a separate business to be undertaken by its wholly owned subsidiary, SBS Holdings and Enterprises Corp.
This move is seen intended balance SBS’ business and curb some of the fluctuations in the chemical trading business while growing and diversifying income streams.